Intellectual fads will not benefit the world's poor

7 May 2010

Kristian Niemietz suggests in the Catholic Herald that Caritas Europa's campaign to eliminate poverty is ill-conceived

"Poverty is a scandal. What else can it be when just over 40 years after man first walked on the moon, there are still humans unable to provide for their most basic needs, like food, shelter, warmth?" With these colourful words, Caritas Europa, the umbrella organisation of the European Caritas branches, launched its Zero Poverty campaign. Caritas is not just any campaigner on poverty, but a voice that is, and should be, taken seriously. So it is not surprising that Zero Poverty quickly attracted favourable media attention.

But while the number of activists registered on the campaign website keeps growing, for an outside observer it remains difficult to see what this initiative actually stands for and what its purpose is. For a start, it is difficult to work out whether they want to raise the living standards of the least well-off, or reduce inequality.

Poverty researchers would tend to describe the former objective as removing "absolute poverty" and the latter as reducing "relative poverty". The statement above relating to providing for the real needs of the poor suggests the latter, but in explaining their purpose they then state: "Around 78 million people in the 27 EU member states (16 per cent of the total population) are at risk of poverty. They live on or below the poverty line."

This figure is completely meaningless. It is an average of 27 national poverty rates, measured in relation to 27 widely differing national median incomes. Relative poverty measures depend entirely on the benchmark you choose. If you treat Europe as a single country and use a poverty line of 60 per cent of the pan-European median income, then poverty almost disappears in north-western Europe, and skyrockets to about two-thirds of the population in eastern Europe. If Catalonia and Andalucía were sovereign states, they would display the same relative poverty rate. But as long as they are regions within Spain, relative poverty in Andalucía is four times higher than that in Catalonia. Indeed, the easiest way to get rid of poverty by this definition is to make everybody equally poor - pull down average incomes and you can magically reduce poverty.

Further, it never becomes quite clear whether this campaign is about the remaining pockets of poverty in the developed world, or whether it also extends to poverty in transition economies, or even to poverty in the world's least developed countries (LDCs). Some passages in Caritas's statements explicitly refer to richer countries, describing, for example, the alleged poverty risks of globalisation. But other passages describe the lot of rural labourers migrating to big cities, a typical phenomenon of transition economies. Still other passages refer to subsistence farming, a typical phenomenon of LDCs.

The distinction between these different "poverties" is not trivial. A key feature of the campaign is the continuous display of moral outrage. Is poverty something to be morally outraged about? The question is not as outlandish as it may seem. If we are talking about the poverty of less developed countries, poverty can often be blamed on corrupted local elites, who use the state apparatus as a tool for cronyism. We should certainly be outraged about this. But the high rates of material deprivation in eastern Europe, to which the campaign also refers, are an entirely different topic. The Baltic States, for example, have embarked on reasonable reform paths since the late 1990s, enabling rapid improvements in living standards. But since they started from very low levels, living standards are still well below western European levels. This is a shame, but not a matter of moral outrage. The best way to deal with poverty in these countries is through continued economic growth.

It is hard to avoid the impression that Zero Poverty is Caritas's attempt to demonstrate its ability to keep up with fashions. There is hardly a bandwagon on to which this initiative does not jump. Fair trade is in there, and so is gender equality, criticism of globalisation, organic farming, executive pay, criticism of consumerism, buying local, climate change concern, corporate social responsibility...

One wonders whether the campaign makers deliberately ignore the contradictions in the policies they advocate. If we in the western world only bought locally produced goods, we would effectively boycott producers in poor countries and make basic goods much more expensive for the poor. If we insist in limiting energy consumption, the poor will be hardest hit. Globalisation has lifted millions of Chinese and Indians out of absolute poverty, and further rounds of globalisation could lift out millions more elsewhere. But it could also entail painful adjustment processes in western economies, the pressure of which may be felt most by those with the lowest productivity. A charity does not need to be concerned with economic issues in detail. But they should not pretend that trade-offs do not exist.

The policy recommendations of the initiative are trivial. Caritas calls for an expansion of existing entitlement programmes, and the creation of new ones. What, one wonders, would that change? Social spending is already very high in developed nations, accounting for between a fifth and a third of national incomes in countries in which governments spend over half of national income in total. If this is not enough to eradicate poverty, then how much government spending will do so? The short answer is: government spending will never be enough, because the state-centric approach to poverty alleviation has such serious limitations. A hyperactive, redistributive state does not always put the interest of the poorest first. Any news report from Greece these days shows that the political process is often driven by those who scream loudest, not by those most in need. Where money does reach the needy, it does not automatically do them a favour. Welfare payments with no work requirements or time limits attached can create long-term dependency; the social consequences can be observed in the pockets of poverty and social breakdown that exist in all western countries. These past failures should encourage us to think of completely different approaches to welfare, but Caritas merely calls for more of the same.

Zero Poverty is a missed opportunity. In the field of poverty mitigation, one could hardly think of a more authoritative voice than Caritas. For decades, Caritas's commitment-driven approach has been around where welfare bureaucracies met their limits. In these economically strained times, they should have concentrated on the area where their competence is undisputed, which is local, practical engagement to alleviate poverty. It is a shame that instead of putting their impressive expertise in the balance, Caritas merely parrots the latest fads.

Kristian Niemietz is poverty research fellow at the Institute of Economic Affairs